Post Session: Quick Review

Extending previous session’s southward journey, Indian equity benchmarks ended Tuesday’s trade on a pessimistic note. Selling intensified during last leg of trade mainly dragged the key benchmark indices BSE Sensex and NSE Nifty below their crucial 38,200 and 11,550 levels, respectively. Markets made a cautious start and traded in very tight range near neutral lines for most part of the day, as traders remain concerned with a private report that the Indian stock markets could tumble and the rupee may fall further ahead of the general elections if a contentious KYC circular issued by the stock market regulator is not scrapped soon. The sentiments remained in lackadaisical mood with a private report highlighting that a sustained weakness in the rupee may push the Reserve Bank of India to further tighten monetary policy, perhaps as early as next month.

Key indices extended losses in the last leg of trade, amid a weakening rupee, which fell to its fresh record low for the third straight session. Domestic sentiments also got hit after export credit provided by banks fell sharply by about 47% to Rs 21,900 crore as of July 20 from a year earlier. The persistent decline in export credit, especially to small players in the current year so far has raised fresh concerns about adequate financial support to exporters. Some anxiety also persists on the street with ICRA in its latest report stating that India’s apparel exports are likely to remain subdued in the near term, even as the worst appears to be over. With the base effect setting in, ICRA expects India’s apparel exports to grow at a modest pace of 1%-2% Y-o-Y for the rest of FY2019, vis-a-vis a sharp de-growth of 14% Y-o-Y in first four months of FY2019.

On the global front, Asian markets end mixed on Tuesday. European markets were trading in red in early deals, as the UK manufacturing sector expanded at the weakest pace in just over two years in August. The manufacturing Purchasing Managers’ Index dropped to 52.8 in August from 53.8 in July. The slowdown was driven by a contraction in new export orders for the first time since April 2016. Back home, banking sector stocks ended lower despite India Ratings’ report that showing further traction for asset resolution, bad loans over Rs 4 trillion are expected to be resolved by 2018. Besides, stocks related to telecom sector were under pressure with private report stating that the sector continues to reel under acute financial stress, weighed down by nearly Rs 8 lakh-crore debt and bruising price wars reflected in slumping revenue and operating income.

 The BSE Sensex ended at 38161.76, down by 150.76 points or 0.39% after trading in a range of 38098.60 and 38518.56. There were 6 stocks advancing against 25 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 2.66%, while Small cap index was down by 2.08%. (Provisional)

The only gaining sectoral indices on the BSE were IT up by 1.88% and TECK up by 1.24%, while Consumer Durables down by 2.83%, Basic Materials down by 2.51%, PSU down by 2.47%, Telecom down by 2.25% and Realty down by 2.25% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Infosys up by 2.50%, TCS up by 1.91%, Axis Bank up by 1.76%, Wipro up by 1.57% and Reliance Industries up by 1.04%. (Provisional)

On the flip side, Asian Paints down by 3.49%, SBI down by 3.25%, Hindustan Unilever down by 3.03%, Adani Ports &SEZ down by 2.94% and Coal India down by 2.44% were the top losers. (Provisional)

Meanwhile, amid sustained weakness in Indian currency, global ratings agency, Fitch Ratings in its latest report has said the currency volatility will have only a ‘limited impact’ on India’s sovereign credit profile. It added that the country’s sovereign credit profile benefits from relatively strong external finances, especially a low level of external and foreign-currency debt. Recently, Indian rupee depreciated to all time low of 71 against the US dollar.

In a report on APAC sovereigns, Fitch said the recent sell-offs in Indian and Indonesian currency markets underline their sensitivity to shifts in global sentiment and suggest further bouts of pressure are likely as global monetary tightening progresses. It also said ‘Currency volatility, however, is likely to have only a limited impact on their (India and Indonesia) sovereign profiles. India's sovereign credit profile, for example, benefits from relatively strong external finances, especially a low level of external and foreign-currency debt.’

The rating agency said the risk of currency pressures triggering a policy-induced spike in domestic borrowing costs is mitigated by the Reserve Bank of India's relatively narrow focus on its inflation objective. The agency said rising US interest rates and increasing global risk aversion towards emerging-market assets are generating capital outflows and exerting downward pressure on most Asian currencies.

Fitch further said that trade tensions between the US and China have added to market jitters and pose downside risks to growth. Nevertheless, strong fiscal and external buffers, along with flexible policy frameworks, should allow most of the region's economies to weather these challenges. Meanwhile, Fitch had retained India’s sovereign rating at ‘BBB-’ with ‘stable’ outlook in April, 2018, saying that the country’s medium-term growth potential is strong.

The CNX Nifty ended at 11522.25, down by 60.10 points or 0.52% after trading in a range of 11496.85 and 11602.55. There were 9 stocks advancing against 41 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 2.73%, HCL Tech. up by 2.56%, TCS up by 2.29%, Infosys up by 2.28% and Wipro up by 2.06%. (Provisional)
On the flip side, Grasim Industries down by 4.09%, Indiabulls Housing finance down by 3.97%, Ultratech Cement down by 3.72%, Asian Paints down by 3.50% and Titan Co down by 3.49% were the top losers. (Provisional)

European markets were trading in red; UK’s FTSE 100 decreased 5.25 points or 0.07% to 7,499.35, France’s CAC shed 49.54 points or 0.92% to 5,364.26 and Germany’s DAX fell 90.88 points or 0.74% to 12,255.53.

Asian stocks ended mixed on Tuesday as rising trade tensions and the sell-off in emerging market currencies, particularly in Argentina and Turkey, kept investors in a defensive mode. Japanese shares ended lower in choppy trade as lingering global trade concerns saw investors staying on the sidelines. US President Donald Trump gave fresh impetus to trade worries at the weekend when he said there was no need to keep Canada in the North American Free Trade Agreement and warned Congress not to meddle with the trade talks. On economic front, Japanese companies' capital spending increased the most in more than a decade in April to June period, data from the Finance Ministry revealed. Capital spending surged 12.8 percent year-on-year in the June quarter, faster than the 3.4 percent increase a quarter ago. This was the strongest growth since 2007. Meanwhile, Chinese shares ended lower, as investors hunted for bargains in beaten-down real estate and banking stocks, but the threat of US tariffs on $200 billion worth of imported Chinese goods still clouded the market.